Petrobras Shares Pummel Brazil’s Ibovespa; Tech Stocks Dampen US Markets

Brazil’s market was the only one in Latin America to close with losses on Thursday, while US shares fell as Wall Street doubts whether the Fed will soften its monetary policy

Petrobras shares fell on Thursday
By Bloomberg Línea and Bloomberg News
August 11, 2022 | 06:09 PM

A roundup of Thursday’s stock market results from across the region

👑 Mexico, Latin America’s leader:

Although at the end of the session the US stock markets fell back, the lower risk aversion generated by the inflation data had a positive impact on Latin American markets.

The region’s main indicators, with the exception of the Ibovespa, closed with gains in a session in which the Mexican stock market recorded the largest increase.

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The S&P/BMV IPC (MEXBOL) rose driven by the materials, communication services and health sectors.

Shares of Grupo Mexico (GMEXICOB), Qualitas Controladora (Q*) and Femsa (FEMSAUBD) were among the best performers on the day.

📉 A bad day for Brazil’s Ibovespa:

Brazil’s Ibovespa (IBOV) wiped the gains made in the afternoon and closed lower, impacted by the fall of Petrobras (PETR3 ; PETR4) shares.

The company announced another reduction in diesel prices for distributors, the second consecutive reduction announced by the oil company.

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The decision reflects a new level in oil prices and comes less than two months before the first round of the presidential elections. The issue of fuel price increases became one of the main topics of the electoral campaign.

The market is weighing the political scenario and the fiscal risks. On Thursday, a rally in defense of democracy and the electoral system gathered lawyers, social movements and artists in downtown Sao Paulo, while other demonstrations in the same sense took place at the same time in other parts of the country.

🗽 On Wall Street:

US stocks wiped out gains on speculation the rally that followed softer inflation data went too far, with the Federal Reserve still set to keep its monetary policy tight. Bond yields climbed.

The S&P 500 edged lower after an advance that topped 1% earlier in the day and put the gauge near the 50% Fibonacci retracement level for the current bear market. Several analysts attributed the recent surge to short-covering. Tech underperformed following a runup that sent the Nasdaq 100 more than 20% above its June lows. Big names like Tesla Inc. and Amazon.com Inc. sank.

The Nasdaq Composite (CCMDPL) led the losses, dragged down by technology companies’ shares, and closed 0.58% lower. The S&P 500 dropped 0.07%, while the Dow Jones Industrials dropped 0.08%.

Treasuries dropped, sending 30-year yields soaring nearly 16 basis points after an auction of the securities drew middling demand despite having cheapened into the bidding deadline.

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Earlier gains in stocks were driven by data showing a key measure of US producer prices unexpectedly slipped for the first time in more than two years. Similar to the consumer prices report on Wednesday, both the overall and core figures were softer than forecast.

Even so, inflation remains stubbornly high and will likely keep the Fed on an aggressive path to curb it. Swaps continued to price in a 50-basis-point rate hike by the US central bank in September.

“We’ve had developments over the last couple of days that suggest that maybe the environment is getting a little bit better,” Anthony Saglimbene, global market strategist at Ameriprise, told Bloomberg Television. “But inflation is still very, very high. There’s a lot of work for the Federal Reserve to continue to raise interest rates.”

A separate report showed applications for US unemployment insurance rose for a second week and held near the highest level since November -- indicating continued moderation in the labor market.

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UBS Global Wealth Management’s Mark Haefele reiterated his stance that “this is not the time to make big directional calls on the market” amid “ambiguity about the direction of the economy and Fed policy.”

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By one measure, the Fed has achieved one of its policy goals in fighting rising prices.

Inflation-adjusted US rates have climbed above zero across the curve for the first time since the central bank started tightening this year. A positive near-term real rate means investors expect the policy rates to rise above inflation in coming months.

Elsewhere, oil gained after the International Energy Agency boosted its forecast for global demand growth this year, easing concerns about consumption. West Texas Intermediate topped $94 a barrel, while Brent again neared $100.

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On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro rose 0.2% to $1.0318, the British pound fell 0.2% to $1.2190 and the Japanese yen fell 0.2% to 133.11 per dollar.

🔑 The day’s key events:

Forecasts continue to favor oil prices and this time the International Energy Agency was in charge of giving a boost to the market with better prospects for the industry in its monthly report.

According to its estimates, global oil consumption will increase by 2.1 million barrels per day this year, up 2% from its previous forecast, as rising natural gas prices and heat waves have led industries to switch their fuel to oil.

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“With several regions experiencing scorching heat waves, the most recent data confirm increased oil burning in power generation, especially in Europe and the Middle East,” the IEA said in its report.

It also highlighted that it does not see a supply shortage and stocks are expected to increase at a rate of 900,000 barrels per day for the rest of the year, Bloomberg reported.

🍝 For the dinner table debate:

From billionaires to equity firms are part of the list of witnesses involved in the legal process facing Elon Musk and Twitter (TWTR), after the entrepreneur backed out of his $44 billion offer by arguing that the social network had not been clear about the number of bots it has.

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Investors, bankers, friends or anyone else the billionaire might have talked to about the deal make up part of the subpoenas Twitter requested, according to the list compiled by Bloomberg.

Investment mogul Ken Griffin is subpoenaed, along with billionaires Larry Ellison and Marc Andreessen, bank Morgan Stanley (MS) and venture capital firm Sequoia Capital.

Musk has sent his own subpoenas, though far fewer, seeking evidence that Twitter failed to provide him with accurate information about the bot accounts.

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.

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